According to research and modeling by Rystad Energy, the need for oil will increase over the medium term because low-carbon alternatives are not yet developed enough or profitable enough to balance the rising need for industrial services and transportation. The 13 industries that depend on oil will experience a more complicated transition than was anticipated even a few years ago, according to Rystad Energy’s most recent Oil Macro Scenarios research. These results support the idea that because of oil’s competitive advantages across a variety of transportation and industrial operations, oil demand will likely stay sticky and that replacing the capital stock linked to oil consumption will be a difficult and drawn-out process at oilprice.com
The study assesses the oil industry’s five-year demand trajectory, each sector’s technological readiness for change, and the legislative frameworks facilitating such change. Our research clarifies the implications of significant innovations—like the quick electrification of vehicles, trains, and buses—as well as the difficulties encountered by the other industries that do not yet have competitive or completely developed alternative technologies. at oilprice.com
Oil demand is expected to continue rising in the long future, therefore there is less chance of a quick shift away from oil unless there are significant advancements made in low-carbon energy sources that can both technically and financially replace oil. In order to achieve those breakthroughs, our updated mid-term forecast should infuse the oil transition story with a healthy dose of realism and a renewed feeling of urgency to explore and invest even more in clean tech and renewables wherever it makes economic sense at oilprice.com
Moving
It should come as no surprise that the adoption of electric vehicles (EVs), which include both battery electric vehicles (BEV) and plug-in hybrids (PHEV), is a crucial component to estimate the influence on oil demand, since passenger road transportation accounts for about 25% of the world’s oil demand at oilprice.com
EV sales have increased since 2018 and will account for 16% of worldwide sales by 2022. However, an inflection point was reached last year when global EV sales only reached 19%. This was caused by a number of factors, including a dearth of mass-market EVs outside of China, inadequate charging infrastructure, low customer acceptance in some areas, charging insecurity, and the removal of subsidies in some nations.at oilprice.com
In spite of these obstacles, Rystad Energy continues to forecast that in the latter part of this decade and beyond, the electrification of passenger road transportation will resume. Tens of millions of electric vehicles will be produced by automakers in the upcoming years, which will result in economies of scale at oilprice.com
However, it’s crucial to remember that a few of these programs have lately had their funding reduced as a result of subpar investment returns. Ultimately, there will be a significant issue that has to be resolved: “charging insecurity” in locations where automobile owners do not possess private parking spaces. This issue is very severe in a large number of OECD and non-OECD nations oilprice.com/Energy/Crude-Oil/Two-Sectors-Driving-the-Future-of-Oil-Demand.html
There are obstacles in the way of the shift to alternative energy sources outside of passenger vehicle transportation. Since there are still few alternatives to oil, the need for oil in heavy-duty commercial road transport is predicted to increase along with the growth of the global economy, particularly in Asia. For instance, batteries still weigh too much and are too big to fit in a Class 8 vehicle. Even if they did, charging them would take too long at oilprice.com
Battery swapping has showed potential in China, but only a small portion of electric truck fleets use this technique, which involves replacing low-charge batteries with fully charged ones at designated stations. While electric vehicles can be charged while they are moving using techniques like induction and cathenary charging, these systems are currently too costly to be a practical solution. Granted, Tesla and Volvo have begun to produce and deliver electric semitrucks, but for the foreseeable future, the quantity is still limited and will stay that way at oilprice.com
Many of the difficulties faced by the maritime sector are also faced by heavy-duty trucks. A well-established supply chain, safe storage and transportation, and a fuel with a high energy density are necessary for the economical and efficient shipping of huge cargo across oceans. Although some of these needs may be met by substitutes like methanol and ammonia, they have not yet been able to outperform oil on important measures like affordability and energy density. Furthermore, the fleet turnover is expected to slow down due to the rapidly aging global marine fleet oilprice.com/Energy/Crude-Oil/Two-Sectors-Driving-the-Future-of-Oil-Demand.html
An eco-friendly substitute for conventional jet fuel is Sustainable Aviation Fuel (SAF). SAF won’t have a major impact on aviation in the next five years, despite the fact that it has the potential to grow greatly in the sector during the 2030s and beyond. Even with significant airline pledges and the International Civil Aviation Organization’s (ICAO) Corsia program, by the end of this decade, SAF’s proportion of jet fuel demand will be less than 5%. This corresponds to less than 0.4% of the world’s oil consumption at oilprice.com
There’s no need to wait for alternatives when buses and rail transportation are readily available and proven to be very efficient. Thanks to government legislation, the recent electrification trend in these two industries in China, India, and Europe will continue in the upcoming years. However, as these two sectors presently account for less than 3% of oil demand, even if they were to become totally electrified in the next 15 years, the largest reduction in oil demand by 2030 would only be approximately 0.5-0.8 million barres per day.parts that are stationary at oilprice.com
At 42.3% of the world’s oil consumption as of 2024, the stationary sectors—petrochemical, industry, building, non-energy use, energy own use, power, and agriculture—are essential to the energy transition. Due to the growing middle class worldwide, the petrochemical industry anticipates a sharp increase in demand for plastics in the years to come. NGLs and oil will be the primary feedstocks utilized to make plastic. The rate of mechanical and chemical recycling needs to rise in order to decrease the requirement for virgin feedstock. To do this, though, more funding for research and development as well as more investments in the recycling supply chain are required. It is crucial to keep in mind that worldwide recycling rates for plastic are currently only 8% of total plastic usage, and there is little indication that this percentage will rise considerably by the end of the decade.
Reliability of oil consumption in the building sector has shown itself to be higher than anticipated a few years ago. For space and water heating, oil—also known as liquified petroleum gas (LPG), kerosene, or gasoil—remains the most effective energy source in areas without access to the natural gas system and with long, cold winters. Heat-pumps are generally less successful in extremely cold areas, even though they are highly efficient for space heating in milder temperatures. Lastly, LPG may be a cleaner energy source in nations like sub-Saharan Africa that still rely on burning biomass for cooking, which would lead to a 1.5 million barrels per day (bpd) increase in oil usage oilprice.com/Energy/Crude-Oil/Two-Sectors-Driving-the-Future-of-Oil-Demand.html
To reach the high temperatures needed for processes like steelmaking, cement production, petrochemicals, and refining subsectors, high energy density is crucial in the industry sector. Despite being the most practical low-carbon energy carrier substitute for oil, hydrogen is not expected to emerge as a significant contender in the next five years because of its high cost and undeveloped supply network at oilprice.com
Our analysis demonstrates that the demand for oil is still sticky and that changing the capital stock linked to its consumption would require time and money. It also serves as a reminder of how critical it is to comprehend not only the oil industry but the entire energy system as a whole. In the medium run, reducing global emissions is still feasible if other energy sectors accelerate the adoption of clean technology and renewable energy sources. In this context, over the past few years, the fast deployment of solar PV in power generation has done precisely that, replacing coal. Consequently, despite rising oil demand, a rapid reduction in world emissions is still achievable.
